Acceptance by Post in contract law. The posting rule (or mailbox rule in the United States, also known as the “postal rule” or “deposited acceptance rule”) is an exception to the general rule of Contract law in common law countries that acceptance of an offer takes place when communicated. Under the posting rule, that acceptance takes effect when a letter is posted (that is, dropped in a post box or handed to a postal worker). In plain English, the “meeting of the minds” necessary to contract formation occurs at the exact moment word of acceptance is sent via post by the person accepting it, rather than when that acceptance is received by the person who offered the contract.
The rule of contracts by post (postal rules) include the following:
- An offer made by post/letter is not effective until received by the offeree.
- acceptance is effective as soon as it is posted.
- For revocation to be effective, it must be received by the offeree before they post their letter of acceptance.
One rational given for the rule is that the offeror nominates the post office as his or her implied agent, and thus receipt of the acceptance by the post office is regarded as receipt by the offeror. The main effect of the posting rule is that the risk of acceptance being delivered late or lost in the post is placed upon the offeror. If the offeror is reluctant to accept this risk, he can always expressly require as a condition before being legally bound by his offer.
Unlike the other modes of acceptance earlier referred to, the rule, with regard to acceptance by post, is that acceptance takes effect and, therefore, the contract comes into existence the moment a letter of acceptance is posted. This radical departure from what is normally regarded as the moment of acceptance has been justified on various grounds which we shall consider later.
This locus classicus was first laid down by Lord Ellensbrough in 1818 in the famous case of Adams V. Lindsell.
Facts of the case:
By a letter dated September 2, 1817, the defendants, wool merchants, offered to sell a quantity of wool to the plaintiffs, wool manufacturers, and required a reply by post. The defendants misdirected their letter and it did not reach the plaintiffs until the evening of September 5; that same night the plaintiffs posted a letter of acceptance which reached the defendants on September 9. If the letter containing the offer had been properly directed, an answer ought to have been received by September 7.
Meanwhile, on September 8, not having received a reply from the plaintiffs, the defendants sold the wool to another person. The plaintiffs sued for breach of contract.
It was argued on behalf of the defendants that there was no contract until the letter of acceptance was actually received, and that by that time, the wool had already been sold to a third party.
It was held that in a contract concluded by post, the contract comes into existence the moment the letter of acceptance is posted. In this case, therefore, the contract came into existence on September 5, and the defendants committed a breach of it by selling the wool to third parties on September 8.
Several justifications have been advanced for this preference for the moments of posting as constituting the acceptance rather than the time of delivery or the time of opening the letter of acceptance. In Adams V. Lindsell itself, the court dismissed the suggestions that the contract only took effect from the moment the letter of acceptance was received thus:
“…if that were so, no contract could ever be completed by post. For if the defendants were not bound by their offer when accepted by the plaintiffs, until the answer was received, then the plaintiffs ought not to be bound until after they had received the notification that the defendants had received their answer and assented to it. And so it might go on ad infinitum…”
This is obviously an unsatisfactory reason. The process need not go on ad infinitum. If the alternative view were adopted, then acceptance would take effect from the moment the letter was received by the offeror.
There would be no need for further process of writing to inform the offeree that the letter has been received. The offeror would simply act on it just as the offeree now acts on the basis of his letter of acceptance immediately it is posted. He does not write to the offeror that he has posted the letter of acceptance.
In any case, as we shall soon see, a letter of revocation of an offer does not take effect until it is received by the offeree, and yet this has never created the problems suggested by the court in Adams V. Lindsell.
However, more concrete reasons for the rule on acceptance by post were given in the later case of Household Fire Insurance Co. V. Grant (1874-1880) All E.R. 919., where it was extended to the extreme case of the letter of acceptance being lost in the defendant’s company and the latter posted a reply accepting the offer and a statement of the number of shares allotted to him. This letter was lost in the post. When subsequently the company went into liquidation, the defendant who up till then was not aware that he was a shareholder in the company was suddenly called upon to pay for his shares in the company. This action was brought when he resisted the claim.
The court held that; on the authority of Adams V. Lindsell and latter cases adopting the same view, that he was liable to pay for the shares. The contract was formed the moment the company posted the letter of allotment to the defendant and it was irrelevant that he never received the letter itself. In justification of it decision, the court gave the following reasons:
a. The post office is the common agent of both parties. So a letter put in the post is technically acceptance communicated to the offeror.
b. With the posting of the letter of acceptance, a contract is complete in that no other act is necessary to bring it into existence. The acceptor has merely assented to the offeror’s very proposals.
c. An offeror is free to make it a term of his offer that there can be no valid acceptance until he receives the letter of acceptance.
d. Any other rule would lead to fraud and delay in commercial transactions, for the offeree must now wait to hear from the offeror that he has received the acceptance.
e. The rule is most convenient of all possible alternatives.
The rule is obviously arbitrary and harsh, and the powerful dissenting judgment by Branwell, L.J., shows that as many points could be made against it as in it’s favour. Grant’s case itself shows how arbitrary and unjust it could be. How can a person be held bound to a contract when he was never notified of the offeree’s acceptance?
“…it is said that a contrary rule would be hard on the would-be acceptor, who may have made his arrangements on the footing that the bargain was concluded. But to hold as contended would be equally hard on the offeror, who may have made arrangements on the footing that his offer was not accepted”
Furthermore, the post office is just a carrier of mail and nothing else. It cannot be regarded in the law of agency as an agent of both parties. It is just a middle man providing a service. It knows nothing of the bargains of the parties.
In the United states recent decisions suggest a move away from the rule in Adams V. Lindsell. As a result of postal regulations which now permits writers to recover posted letters before they are delivered, it has been held that acceptance is no longercomplete on posting.
In Rhode Island Tool Co. V. U.S, the plaintiffs made an offer by post to supply bolts to the defendants. The defendants posted an acceptance. The plaintiffs then discovered that owing to a miscalculation they had quoted too low a price, and sent a telegram withdrawing their offer which reached the defendants before the letter of acceptance reached the plaintiffs. It was held that the offer had been withdrawn before acceptance became effective. Acceptance was only complete when delivered.
In Dick V. U.S., the facts of this case were similar to the Rhode Island Tool Co. V. U.S. except that the plaintiff was the offeree, and having posted an acceptance to the defendant’s offer for its goods sent a telegram withdrawing the acceptance on discovering that it had mistakenly accepted a price far below what it should have been.
The telegram arrived before the letter of acceptance. It was held that the acceptance was successfully withdrawn since the telegram had reached the defendants before the letter of acceptance.
An English writer has attempted to distinguish between the English and Nigerian positions on the law relating to acceptance by post. By Section 3 of the Post Office Act (cap. 156 of the 1958 laws of the Federation of Nigeria) a postal article is deemed to be in the course of transmission by post until delivered to the addresses, and delivering takes place if the article is delivered at the house or office of the addressee or to addressee himself or his authorized agent.
According to Professor Uche, the effect of this section is that in Nigeria, and in Ghana, which has similar statutory provisions, an acceptance by post does not take effect until the letter of acceptance is delivered to the offeror or his agent.
Attractive as this argument appears, it is based on a misunderstanding of Section 3 of the Post Office Act. It does not have the effect attributed to it by the learned writer at all. That provision was specifically meant to define the liability of the post office for loss of or damage to, postal articles, and what is being stated in the Section is that the liability of the post office does not arise until the article is in the course of transmission, and ends with delivery. It cannot, and does not, purport to lay down any rules governing the formation of a contract between private individuals who happen to use the post as a carrier. In the absence of contrary authority, therefore, the rule in Adams V. Lindsell applies with equal force in Nigeria as in England. Acceptance by Post in contract law; Acceptance by Post in contract law.
Exceptions to the Rule in Adams V. Lindsell
A rule as controversial and arbitrary as that on acceptance by post, must of necessity be subject to several exceptions, if only to avoid absurdity in certain situations and to mitigate hardship and injustice in others.
In the following situations the rule does not apply:
a. Where the terms of the offer either expressly or implicitly indicates that acceptance must reach the offeror. As was suggested in Household Fire Insurance Co. V. Grant, the rule in Adams V. Lindsell can be displaced by any offeror who indicates that acceptance is to take effect from only the time of delivery of the letter of acceptance to him.
In Holwell Securities Ltd. V. Hughes, (1974) 1 All E.R. 161,
Facts of the case were as follows:
The defendants granted a six months option to the plaintiffs to purchase certain property. The offer stipulated that the option was to be accepted “by notice in writing” to the defendant. The plaintiff sent a written acceptance by ordinary post but this was never received by the defendant. The plaintiff claimed that he had made a valid acceptance as soon as the letter exercising the option was posted.
The Court held that the option had not been validly exercised. Acceptance was to take effect from the time the letter exercising the option reached the defendants and not at the time of posting.
According to Lawton, L.J.:
“…the rule (acceptance by post) does not apply if having regard to all the circumstances including the nature of the subject matter under consideration, the negotiating parties cannot have intended that there should be a binding agreement until the party accepting an offer or exercising the option had in fact communicated the acceptance…to the other”.
Earlier, the court had held that the requirement that the option was to be exercised by notice to the defendant meant that the option could not be validly exercised until the later actually received notice of it.
“…in my judgment, notice is a means of making something known…if a notice is to be of any value it must be an intimation to someone.
A notice which cannot impinge on someone is not functioning as such.
A situation similar to that in Holwell Securities V. Hughes occurred in Afolabi V. Polymera Industries, where the plaintiff had applied to be appointed an agent of the defendants, manufacturers of plastic products. He was then offered the position in a letter with the following words:
“…will you please read, study carefully and sign duplicate copy attached, signifying your agreement to all points as listed above and return at your earliest convenience for records”.
There was no evidence that he ever returned the signed duplicate copy.
It was held that the defendants’ letter had set out the manner in which the offer it contained should be accepted, in order to become a binding contract, and in the absence of acceptable evidence that he signed and returned the duplicate copy. There was no valid acceptance of the offer.
b. Where the application of the rule would produce manifest inconvenience and absurdity.
c. The rule does not apply where the letter of acceptance is wrongly addressed or inadequately stamped.
d. Finally, it does not apply where the letter was not properly posted. In Re London and Northern Bank, exp. Jones, the bank wrote a letter accepting Dr. Jones’ application for shares and handed it to one of its employees for posting early on October 27, 1900. The employee took the letter to the G.P.O. at about 7:00am a.m. that morning, but instead of posting it himself, handed it over to a postman. The postman took the letter to a district office where he posted the letter and it was not delivered until 7:30am. Meanwhile, Jones had earlier written a letter withdrawing his offer. This letter was received at the bank at 8:30am and opened at 9:30 am.
It was held that handing the letter to the postman outside the G.P.O. was not posting so as to constitute acceptance.
As the bank was unable to prove that the letter of acceptance was properly posted before 9:30am (when Dr. Jones letter of withdrawal of offer was opened), it was held that Jones had effectively withdrawn his offer.
Revocation of Acceptance – Acceptance by Post in contract law
Generally, where acceptance is not by post it can be revoked before it reaches the offeror. However, the position is not so clear with regards to posted acceptances. Specifically, can a letter of acceptance, once posted, be revoked by telephone or telegram? Logic would seem to be against this since by the rule of acceptance by post there is already a binding contract. Thus, the ability to revoke will give the offeree the best of two worlds.
However, there is no English and Nigeria authority on this point. But it has been suggested that since the notice of revocation will reach the offeror before the letter of acceptance, his position is not prejudiced.
In Countess Dunmore V. Alexander, a Scottish case, Alexander, through one lady Agnew, made an offer to the countess to enter her service. The countess, on November 5, wrote to lady Agnew accepting the offer, and the latter forwarded the letter to Alexandeer. On November 6, the countess wrote another letter to lady Agnew cancelling the acceptance and she forwarded this second letter by express mail. Alexander received both letters together.
It was held that the acceptance had been effectively withdrawn since the letter cancelling the acceptance did not arrive later than the letter of acceptance. The role of Lady Agnew as an intermediary and the persuasive effect of this case.
Acceptance by Post in contract law; Acceptance by Post in contract law; Acceptance by Post in contract law; Acceptance by Post in contract law